All that is necessary for evil to triumph, is for good men to do nothing. -- Edmund Burke

Saturday, September 27, 2008

Drawing the Line on "The Deal": What House Republicans MUST Insist Upon

Earmarks for ACORN or other pet Democrat causes do not have to be a part of this monstrosity. The Democrats have the votes to pass a package without Republicans, but they need Republican votes to give them cover in case the bailout is a colossal failure. So the House Republicans DO hold the cards here.

The Democrats in Congress could mess it all up. We’ve already seen that they have larded up the legislation with mandates to spend any revenues from the bailout on programs like foreclosure relief, aid to cities and states, and funding for so-called community activist groups, like ACORN and La Raza, that actually don’t share the values of a majority of Americans.

But spending the profits from the bailout on anything (much less on politically-odious projects) undermines the logic of the trade. All of the cash flows from the bailout must go to coupon payments on the borrowed $700 billion. All of the at-maturity payouts must be used to retire the borrowed money and get it off the balance sheet of the United States.

Otherwise, Congressional Democrats like Nancy Pelosi, Harry Reid, Barney Frank, and ACORN-attorney Barack Obama, will have converted the greatest trade in history into the greatest expansion of national debt in history.

Congressional Republicans MUST insist on the removal of all of these earmarks as their price for signing on to the legislation.

And they can do it, too. The American people are so overwhelmingly opposed to the bailout plan that Speaker Pelosi dares not pass the bill without Republican support.

In fact, she has stated that her price is at least 75 Republican votes, or 100 if she can get them.

Democrats know that financial markets continue in an exceptionally precarious state. They have to pass this legislation as soon as they can, ideally before the end of the weekend. Every senior Wall Streeter I talk to is using phrases like “very stretched,” and “can’t hold out much longer.”

The Republicans are therefore in a strong position to ensure that this bailout retains its potential to be the greatest trade in history, rather than one of the greatest expansions of national debt in history.

The latter would be the outcome, if the Democrats are able to ensure that the profits from the trade will be spent rather than returned to investors.

Republicans must insist, as the price of their support for this bill, that all of the provisions which direct that bailout proceeds will be spent on any particular program, should be stripped out.